Picking the right financial
Dear Money Matters,
I'm beginning to panic. I'm afraid that I started saving
too late in life and that I won't have enough to retire without
working a part-time job. I'm also worried about picking an investment
adviser on my own. Could you recommend, or help me find, a great
financial consultant? Any advice you can give will be greatly appreciated.
You can use any of several strategies
to track down a financial consultant. You can always go to a nearby
stock brokerage house and ask to be assigned someone, but that's
very much a shot in the dark.
Moreover, unless you're bringing a good sized
cache of cash to the table, many houses routinely assign less-experienced
brokers to smaller accounts. That may mean you can end up with someone
who's more in tune with MTV than mutual funds. But, if a stock broker
interests you, ask your friends and colleagues for a recommendation.
Chances are that someone's working with a broker with whom they're
Another option is tracking down a financial planner.
These people often offer a wide range of services, covering investments,
budgeting, insurance and other elements of your overall financial
life. There are several sorts of designations that apply to various
sorts of planners:
- Certified Financial Planner (CFP): This
is a planner who has passed exams accredited by the Certified
Financial Planner Board of Standards, a regulatory body that sets
CFP standards. The tests address an applicant's ability to work
with clients' estates, insurance investments and tax affairs.
- Chartered Financial Consultant (ChFC): This
is a designation awarded by the American College in Bryn Mawr,
Pa., to financial planners who complete 10 courses and 20 hours
of examinations covering economics, insurance, taxation, estate
planning and other related areas. They must also have at least
several years' experience in the field of finance.
- Chartered Financial Analyst (CFA): Awarded
by the Institute of Chartered Financial Analysts, this designation
focuses on portfolio management and securities analysis. It also
covers economics, financial accounting, portfolio management,
securities analysis and standards of conduct.
- Registered investment adviser: Someone
who has received approval from the Securities and Exchange Commission
to give financial advice to clients for a fee.
- Registered representative: The official
term for a stockbroker or account executive with a brokerage firm.
To be registered, a broker must pass licensing exams administered
by the National Association of Securities Dealers. Some states
mandate additional testing.
Bear in mind, that these sorts of designations don't
guarantee that a certain planner is suitable to you and your needs:
- Ask friends and co-workers for recommendations.
If someone's satisfied with her planner, ask her how she works
with the planner -- does she just invest or is she involved in
other activities such as estate planning or saving money for a
child's college education?
- Try to work up a list of several candidates
and interview them. Ask about their experience, training and other
elements of their professional background. Ask if they've ever
been disciplined for any reason and, if so, don't be shy about
asking about the particulars.
- Ask the planners if they work with anyone
with a situation similar to yours. Have them detail precisely
what they do and how they arrived at those financial choices.
Ask them for a sample of their work to gauge the depth of their
financial advice and whether it's suited to your needs.
- One key element -- ask for referrals to
clients with whom the planner has worked. If the planner balks
or starts spewing some blarney about confidentiality, grab your
wallet and make for the door. Planners on the up and up should
be more than happy to substantiate their successes by letting
you talk with other clients.
- Ask how the planner will be compensated.
As a general rule, it's often wise to stick with fee-only planners
who levy a flat fee or who work by the hour. By contrast, planners
who push commissioned-based products may be tempted to recommend
investments that pay them the biggest cut, not necessarily those
that best fit your financial circumstances.
Here are some Web sites that provide additional information
and ways to hook up with a planner in your area:
-- Posted: June 19, 2002